Chapter 2, Problem 13E

Departmental Predetermined Overhead Rates
White Company has two departments, Cutting and Finishing. The company uses a job-order costing system and computes a predeterminedoverhead rate in each department. The Cutting Department bases its rate on machine-hours, and the Finishing Department bases its rate ondirect labor-hours. At the beginning of the year, the company made the following estimates:

Required:
1. Compute the predetermined overhead rate for each department.
2. The job cost sheet for Job 203, which was started and completed during the year, showed the following:

Using the predetermined overhead rates that you computed in (1) above, compute the total manufacturing cost assigned to Job 203.
3. Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwidepredetermined overhead rate based on direct labor-hours, rather than using departmental rates? Explain. No computations are necessary.